Open the Door to Communication

A CUNA subcommittee leads the charge to a better regulator-CU relationship.

May 23, 2011

Everywhere I go during this spring “meeting season”—the time when many leagues and credit unions hold their annual conferences—credit unions give me an earful about the regulator.

Rigid. Hostile. Overkill. These are typical of the words that I hear credit unions use to describe their dealings with the federal agency.

Here’s where I believe the regulator might be coming from:

  • Pondering tough questions. Coming out of the Great Recession—the worst in more than 80 years—financial institution regulators had to ask themselves: Should we be tough today to avert problems tomorrow, or should we consider it the other way around? Clearly, the former approach doesn’t make for many friends.
  • Feeling the pressure. Some in the legislative and executive branches of government have made this clear to federal financial institution regulators: Be assertive, and address any developing problems in your industry before another crisis occurs. It’s guidance that’s simply not ignored.
  • Blaming the economy. Sounds like an excuse, but also difficult to discount, especially in hard-hit states like Arizona, California, Florida, Nevada, and others. But credit unions in other states say they don’t have the same issues. They ask why they must face the same regulatory approach as those distressed states?

If there’s a common thread that runs through the points above, it’s “communication,” including the important “why” aspect: Why is NCUA taking this approach?

That’s something CUNA has been addressing since early this year on both sides—the regulated and the regulator. Our goals are to delineate the issues, get communication flowing, and get to the “why.” So here’s what we’ve done:

In January, CUNA unveiled the first edition of its “Supervisory Issues and Examinations: Guidance for Credit Unions During the Current Economic Times and Beyond."

This 64-page report was produced with state leagues and with direct input from credit unions. It lists 24 credit union “examination rights.” These include the right of credit unions to “manage risk without being directed by examiners to eliminate it,” and the right to “appeal examiner findings, conclusions, or directives without retaliation from their regulator.”

These rights are cross-referenced to sections contained in the NCUA Examiner’s Guide—the agency’s written guidance to staff conducting examinations.

The report’s purpose is to give credit unions more information, which then can improve their communication with examiners and help them see why the agency is taking a certain action.

Leading the charge on this effort has been CUNA’s Examination and Supervision Subcommittee, which focuses on issues related to NCUA and its regulatory oversight of credit unions. Chaired by Paul Mercer, president/CEO of the Ohio Credit Union League, the subcommittee has been unremitting in its effort to open communication with NCUA.

In fact, the subcommittee has opened the door to better communication, and walked right through.

The committee now meets monthly with the agency—typically by teleconference—to discuss exam issues raised by credit unions and to listen to the agency’s views and future plans.

For example: NCUA discusses where it believes more oversight is necessary, and the subcommittee relates the importance of keeping regulation in context—limiting rules to problem areas only, not to well-run credit unions. The subcommittee also asks “why” whenever possible.

Further, we want to improve the agency’s exam process, specifically urging that examiners work with credit unions, rather than merely prescribe terms. And we’re pressing the agency to reconsider its budget at midyear, if not before.

It’s a back and forth, and both sides learn from it.

There should be a healthy tension between the regulator and the regulated. Recently, however, it seems the tension has become “healthier” than usual.

As NCUA Chairman Debbie Matz said at CUNA’s Governmental Affairs Conference earlier this year, we owe it to credit union members to “continue to work together when we agree, and to talk openly and honestly when we don’t.”

I have no argument with that approach, and CUNA is taking a lead role in making that happen.

BILL CHENEY is CUNA’s president/CEO.